Evolution of Financial Organisation: 1903 Year - Before Railway Board (1905)
Thomas Robertson Report
In his report, he recommended setting up of a Railway Board consisting of a President / Chief Commissioner and 2 Commissioners, who are having a practical knowledge of Railway matters and should be “Men of high Railway standing”
Railway Board
Separation Convention:
"We recommend that the Finance Department should cease to control the internal finances of the railway, that the railways should have a separate budget of their own, be responsible for earning and expending their own incomes and for providing such net revenue as is required to meet the interest on the debt incurred or to be incurred by the Government for railway purpose; and that the railway budget should be presented to the Legislative Assembly, not by the Finance Member of the Council but by the Member in charge of Railways",
Salient features of Acworth committee recommendations are:
No role of Finance Department in regards with Railway Finances
Separation of Railway Budget from General Budget
Railways were responsible for earnings and expending their own incomes
Obligation of paying of Interest on the Debt (i.e., Dividends) to General Finances (Ministry of Finance)
Presenting of Railway Budget by the Member, in charge of Railways/Minister of Railways (not by Finance Member / Finance Minister)
Merger of Railway Budget with the General Budget
Evolvement of Financial Organisation - 5 Stages:
First Stage: Prior to the appointment of FC
Prior to the appointment of FC - Financial Commissioner for Railways. In this stage, Accounting work was done by the AG - Accountant General, Railways, under the administrative control of the Auditor General (like Present C&AG - Comptroller & Auditor General of India)
Second Stage: Appointment of FC. Separate cadre of IRAS
Third Stage: Separation of Accounting & Auditing functions
Fourth Stage: Railway Accounts under the control of GM
Fifth Stage: Setting up of distinct Finance Branch under PFA
Setting up of a distinct Finance Branch under PFA for placing at the disposal of the GM
An improved machinery for financial advice and control.
experimental measure in B.B & C.I Railway in 1947 and later adopted permanently on all Indian Railways.
Summary:
Member Finance
In the event of a difference of opinion between the Member Finance and other Members of Railway Board, the former, has the right to refer the matter to the Finance Minister. This stipulation is equally applicable to the difference between PFA and other PHODs or GM.
May issue instructions to the PFAs, on all accounting and administrative matters. These instructions will be communicated to the GM and it is the duty of PFA, to give effect to them. The PFA should, however, keep the GMs in touch with such correspondence as may be exchanged by him directly with Member Finance
Finance Branch:
Assist Management
Making rational plans and decisions.
Controlling the operations of the Railway Administration as a whole.
This role is in no way abated by the fact that in case of disagreement, when he has been overruled by the GM, the PFA may request the GM to make a reference to the Railway Board for orders, and the GM would be under an obligation to make such a reference incorporating therein fairly and fully the comments and views of the PFA.
Budget:
It is obligatory on the Railway Administration i.e., GM to furnish to the Railway Board a verbatim copy of the opinion expressed by PFA with every such proposal, unless it has his unqualified concurrence in which case the fact that he has concurred in the proposal should be indicated in the letter addressed to the Railway Board.
The PFA’s appreciation of the proposal accompanying the Administration's letter should be sufficiently comprehensive and should not only contain his comments, if any, on the facts adduced in justification of the proposal but should also mention its financial and budgetary implications and his views as to its financial prudence.
To furnish and interpret financial statements
Compile cost data and prepare cost reports
Explore avenues of controlling staff and material costs, institute and operate budgetary control procedures, and participate in all Capital expenditure and rating/pricing decisions duly employing tools of analyzing financial decisions such as IRR, Sensitivity Analysis etc.
Standards / canons of financial propriety
Para No. 116 of Finance Code -
Rule No. 21 of GFR ( General Financial Rules) of Dept. of Expenditure, Ministry of Finance, Govt. of India.
All sanctioning authorities must pay due regard these rules/principles while exercising their financial powers. There is a misnomer, that these are the norms to be followed by financial authorities (Finance officers). But it is not correct. All Executives/Officers as sanctioning authorities are conscious of these standards.
Every Officer should also enforce financial order and strict economy at every step and see that all relevant financial rules and regulations are observed, by his own office and by subordinate disbursing officers.
KEYWORD – P V A C A
1. The expenditure should not prima facie be more than the occasion demands.
(prima facie means 'at first appearance' or 'before investigation'. A proposal for purchase of a chair for officers at a cost of Rs.one lakh need not require much investigation to sanction the same. That means on the face itself i.e., cost of the chair Rs. one lakh is not justified to incur expenditure.)
2. That every Government servant should exercise' the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of the expenditure of his own money.
(As an ordinary person, how much exercise we would be taken for purchase of Computer or Plasma Color Television, the same exercise supposed to be applied also for expenditure involved of public money)
3. No authority should exercise its powers of sanctioning expenditure to pass an order which will be directly or indirectly to its own advantage.
(Sanctioning of expenditure would not be advantageous to the sanctioning authorities directly or indirectly. That means Officer should not decide the specifications of the items to be purchased to suit the particular firm for which he or his relatives have a stake)
4. Public moneys should not be utilized for the benefit of a particular person or section of the community unless-
a. the amount of expenditure involved is insignificant ; or
b. a claim for the amount could be enforced in a court of law ; or
c. the expenditure is in pursuance of a recognized policy or custom.
5. The amount of allowances, such as traveling allowances, granted to meet expenditure of a particular type, should be so regulated that the allowances are not on the whole sources of profit to the recipients.
( People should not think of the allowances such as Travelling allowance, Over time allowance, etc as profit. It should not be correct )
Audit officers shall also be responsible for watching that the above principles are strictly observed or not.
Key Takeaways for MCQ
Before 1905, Railways under the control of PWD - Public Works Department
Railway Board formed in the year 1905 under Ministry of Commerce & Industries
Railway Board formed on the recommendations of Sir Robert Thomson Committee
Railway Department established in the Year 1908. (Before that, Railways under the Ministry of Commerce & Industries)
FC - Financial Commissioner (now Member Finance) appointment in the year 1923 - on the recommendations of Sir Acworth Committee.
Separation of the Railway Budget from the General Budget - in the year 1924 - based on the recommendations of Sir Acworth Committee
The merger of the Railway Budget with the General Budget in the Financial year 2017-18
The financial organisation brought under the GM - Based on the recommendations of the Indian Railway Enquiry Committee, 1937 (commonly known as the Wedgwood Committee)
The designation of CAO-Chief Accounts Officer was redesigned as the FA&CAO - Financial Advisor & Chief Accounts Officer.
Separating the Accounting and Auditing Functions - 1929 - on the recommendations of Report of Sir Arthur Lowes Dicknson
Placing the Railway Accounts Department under the administrative control of GM instead of FC - on the recommendations of Indian Railway Enquiry Committee, 1937 (commonly known as Wedgwood Committee).
Prior to 1937 year - CAO - Chief Accounts Officer - under the administrative control of FC.
1937 year onwards - CAO - Chief Accounts Officer - under the administrative control of GM.
1947 - Setting up of a distinct Finance Branch under PFA for placing at the disposal of the GM
Canons of Financial Proprity - Para No. 116 of Finance Code Volume One
Canons of Financial Proprity - Rule 21 of GFR
Canons of Financial Proprity - KEYWORD – P V A C A ( P Stands for Prima facie, V stands for Vigilance, A stands for Advantageous C stands for Community & A stands for Allowance.
Audit officers shall also be responsible for watching that the canons of financial priority are strictly observed or not.
Previous | Now |
Railway Branch | Railway Board |
Public Works Dept | Railway Dept |
Secretary, Railway Branch | Chairman & CEO, Railway Board |
Dy.Secretary – Accounts | Member (Finance) - MF |
Dy. Secretary – Traffic | Member (O&BD - Operations & Business Development) - M/O&BD |
Dy. Secretary – Construction | Surrendered now. (Previously it was Member - Engineering) |
Circle | Zonal Railway |
Consulting Engineer | General Manager |
Govt Examiner of Accounts | PFA – Principal Financial Advisor |
Event | Year | Committee (recommended by) |
Railway Board established | 1905 | Sir Thomson Robertson Committee |
Railway Department established | 1908 | Railway Finance Committee |
FC - Financial Commissioner appointment | 1923 | Sir Acworth Committee |
Separation of Railway finances from General Finances or Railway Budget from General Budget | 1924 | Sir Acworth Committee |
Separation of Accounts & Audit Functions in IR | 1929 | Sir Arthur Lowes Dicknson |
Brought Railway Accounts under the control of GM (instead of FC) | 1941 | Indian Railway Enquiry Committee (commonly known as Wedgewood Committee) |
Merger of Railway Budget with General Budget | 2017-18 | NITI Aayog recommendations |
MCQ on First chapter of Finance Code - Financial Organization - Historical Background
SN | Question | Answer |
1 | Railway Board was formed in the year ______ on the recommendations of _______ 1903, Railway Finance Committee 1903, Sir Thomson Robertson Committee 1905, Railway Finance Committee 1905, Sir Thomson Robertson Committee
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2 | FC - Financial Commissioner (Present Member Finance)- First appointed in the year _____ on the recommendations of _____________ 1923, Sir Acworth Committee 1923, Sir Thomas Robertson Committee 1924, Sir Acworth Committee 1924, Sir Thomas Robertson Committee
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|
3 | Separating the Audit and Accounts functions in Indian Railways in the year ______ on the recommendations of _____________ 1924, Sir Acworth Committee 1929, Sir Arthur Lowes Dicknson’s Report 1923, Sir Acworth Committee 1924, Sir Arthur Lowes Dicknson’s Report
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4 | Canons of Financial Propriety - Para _____ of ________ 116 of Accounts Code 116 of Finance Code 126 of Accounts Code 126 of Finance Code
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5 | Indian Railways were under the control of _________Departments from 1903 to till now (as per chronological order) PWD, Transport and Railways Commerce & Industries, PWD and Railways PWD, Commerce & Industries and Railways Commerce & Industries and Railways
|
|
6 | Placing of Railway Accounts Department under the administrative control of GM instead of FC - on the recommendations of _________ Indian Railways Enquiry Committee (Wedgewood Committee) Railway Finance Committee Sir Thomas Robertson Committee Sir Arthur Lowes Dicknson
|
|
7 | Merger of Railway Budget with the General Budget takes place in the year _____ 2018-19 2017-18 2020-21 2016-17
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8 | The designations of Accounts Officer in IR are _________ (chronological order) Financial Advisor, Chief Accounts Officer, FA&CAO and PFA Chief Accounts Officer, Financial Advisor, FA&CA and PFA Chief Accounts Officer, FA&CAO and PFA FA&CAO and PFA
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9 | Setting up of a distinct Finance Branch under FA&CAO (present PFA) for placing at the disposal of GM in the year _____ 1924 1929 1941 1947
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10 | Before 1905, entire Indian Railways was divided into 7 _____ Zones Sections Sectors Circles
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Answers for MCQ on
First chapter of Finance Code - Financial Organization - Historical Background
SN | Question | Answer |
1 | Railway Board was formed in the year ______ on the recommendations of _______ 1903, Railway Finance Committee 1903, Sir Thomson Robertson Committee 1905, Railway Finance Committee 1905, Sir Thomson Robertson Committee
| D |
2 | FC - Financial Commissioner (Present Member Finance)- First appointed in the year _____ on the recommendations of _____________ 1923, Sir Acworth Committee 1923, Sir Thomas Robertson Committee 1924, Sir Acworth Committee 1924, Sir Thomas Robertson Committee
| A |
3 | Separating the Audit and Accounts functions in Indian Railways in the year ______ on the recommendations of _____________ 1924, Sir Acworth Committee 1929, Sir Arthur Lowes Dicknson’s Report 1923, Sir Acworth Committee 1924, Sir Arthur Lowes Dicknson’s Report
| B |
4 | Canons of Financial Propriety - Para _____ of ________ 116 of Accounts Code 116 of Finance Code 126 of Accounts Code 126 of Finance Code
| B |
5 | Indian Railways were under the control of _________Departments from 1903 to till now (as per chronological order) PWD, Transport and Railways Commerce & Industries, PWD and Railways PWD, Commerce & Industries and Railways Commerce & Industries and Railways
| C |
6 | Placing of Railway Accounts Department under the administrative control of GM instead of FC - on the recommendations of _________ Indian Railways Enquiry Committee (Wedgewood Committee) Railway Finance Committee Sir Thomas Robertson Committee Sir Arthur Lowes Dicknson
| A |
7 | Merger of Railway Budget with the General Budget takes place in the year _____ 2018-19 2017-18 2020-21 2016-17
| B |
8 | The designations of Accounts Officer in IR are _________ (chronological order) Financial Advisor, Chief Accounts Officer, FA&CAO and PFA Chief Accounts Officer, Financial Advisor, FA&CA and PFA Chief Accounts Officer, FA&CAO and PFA FA&CAO and PFA
| C |
9 | Setting up of a distinct Finance Branch under FA&CAO (present PFA) for placing at the disposal of GM in the year _____ 1924 1929 1941 1947
| D |
10 | Before 1905, entire Indian Railways was divided into 7 _____ Zones Sections Sectors Circles
| D |
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